TFI International (TSX:TFII) shares had their worst day in a long while on Friday, October 30, after the Montreal trucking and logistics company posted third-quarter Earnings that fell short of forecasts and gave a fourth-quarter outlook well below what analysts had pencilled in.

The stock closed at C$130.05 on the Toronto Stock Exchange, down C$27.09. It was the biggest decliner on the S&P/TSX Composite on a day when the benchmark itself dropped about 629 points.

What happened

TFI released its results after the market closed on Thursday, October 29. On the surface the numbers looked solid. Total Revenue rose to US$2.23 billion from US$1.97 billion a year earlier, and Net Income climbed to US$105.7 million from US$84.7 million.

Adjusted Diluted Earnings per Share came in at US$1.67, up from US$1.20. But that was below the consensus estimate of US$1.75, and below the US$1.70 to US$1.80 range TFI itself had guided to in July.

The bigger blow was the outlook. TFI said it expects fourth-quarter adjusted diluted EPS of US$1.30 to US$1.40. Some analyst expectations were roughly US$1.67, leaving the midpoint of the new range far short of the Street.

Why it matters

The weak spot was less-than-truckload (LTL) shipping, the Business that moves smaller loads from multiple customers on the same truck. LTL Operating Income fell to US$44.4 million, down by more than two-fifths from a year earlier, and the segment's revenue before fuel Surcharge slipped slightly to US$677.7 million.

Part of that drop came from a US$14.4 million non-cash Impairment on a building. Even so, pricing was soft. LTL shipments rose, but revenue per shipment, excluding fuel, declined. It also flagged an LTL contract worth about US$30 million a quarter that will not be renewed past January 31, 2027.

Chairman and chief executive Alain Bédard pinned much of the trouble on high diesel prices, saying some U.S. operations were hit harder because their route networks are less efficient. Analyst Benoit Poirier said the LTL weakness "overshadowed solid execution" elsewhere in the company.

That solid execution was real. Truckload operating income nearly doubled to US$100.2 million, and logistics operating income rose to US$49.4 million. Bédard said in the release that truckload delivered double-digit top-line growth "despite fewer trucks."

The bigger picture

Friday was a rough session for Canadian stocks overall. Weak results from Intel and Amazon revived worries about artificial-intelligence spending, gold slid to a one-year low and banks fell on rate concerns after the Bank of Canada raised its policy rate on Wednesday. Decliners outnumbered advancers on the TSX by 661 to 339.

Fuel is a particular sore point for truckers right now. West Texas Intermediate crude traded above US$100 a barrel on Friday after a tanker attack in the Strait of Hormuz, a backdrop that does little to ease Bédard's diesel concerns.

Not every transport name suffered. Canadian National Railway rose after beating expectations, showing investors were picking through earnings rather than dumping the whole sector.

What to watch next

TFI raised its quarterly Dividend to US$0.47 a share, up from US$0.45, but did not buy back any shares for cancellation in the quarter. Free Cash Flow fell to US$116.4 million from US$199.4 million.

Investors will watch whether LTL pricing improvements take hold. Bédard said pricing "began to benefit results late in the quarter and into October." The company expects year-over-year operating ratio gains in truckload and logistics in the fourth quarter, but little or none in LTL.

Analysts are also likely to revisit their targets after the guidance cut. For now, the market has made its verdict clear.